Unilever 2012 Annual Report Download - page 93

90 Unilever Annual Report and Accounts 2012Financial statements
NOTES TO THE ONSOLIDATED FINANIAL STATEMENTS UNILEVER ROUP
1 Accountng nformaton and polces
1 Accountng nformaton and polces
The accounting policies adopted are the same as those which
were applied for the previous financial year, except as set out
below under the heading ‘Recent accounting developments’.
Unlever
The two parent companies, NV and PLC, together with their group
companies, operate as a single economic entity (the Unilever
Group, also referred to as Unilever or the Group). NV and PLC
have the same Directors and are linked by a series of agreements,
including an Equalisation Agreement, which are designed so that
the positions of the shareholders of both companies are as closely
as possible the same as if they held shares in a single company.
The Equalisation Agreement provides that both companies adopt
the same accounting principles. It also requires that dividends
and other rights and benefits attaching to each ordinary share
of NV, be equal in value to those rights and benefits attaching to
each ordinary share of PLC, as if each such unit of capital formed
part of the ordinary share capital of one and the same company.
Bass of consoldaton
Due to the operational and contractual arrangements referred to
above, NV and PLC form a single reporting entity for the purposes
of presenting consolidated financial statements. Accordingly, the
financial statements of Unilever are presented by both NV and
PLC as their respective consolidated financial statements. Group
companies included in the consolidation are those companies
controlled by NV or PLC. Control exists when the Group has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
The net assets and results of acquired businesses are included in
the consolidated financial statements from their respective dates
of acquisition, being the date on which the Group obtains control.
The results of disposed businesses are included in the
consolidated financial statements up to their date of disposal,
being the date control ceases.
Intra-group transactions and balances are eliminated.
The company income statement for NV is included in the
consolidated financial statements. An abbreviated income
statement has been disclosed in the NV company accounts
on page 133 in accordance with Section 402, Book 2, of the
Netherlands Civil Code.
ompanes legslaton and accountng standards
The consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union (EU), IFRIC Interpretations
and in accordance with Part 9 of Book 2 of the Civil Code in the
Netherlands and the UK Companies Act 2006 applicable to
companies reporting under IFRS. They are also in compliance
with IFRS as issued by the International Accounting Standards
Board (IASB).
These financial statements are prepared under the historical
cost convention unless otherwise indicated.
Accountng polces
Accounting policies are included in the relevant notes to the
consolidated financial statements and have been highlighted
withlight green shading on pages 92 to 129. The accounting
policies below are applied throughout the financial statements.
Foregn currences
The consolidated financial statements are presented in euros.
Thefunctional currencies of NV and PLC are euros and sterling
respectively. Items included in the financial statements of
individual group companies are recorded in their respective
functional currency which is the currency of the primary
economic environment in which each entity operates.
Foreign currency transactions in individual group companies
are translated into functional currency using exchange rates at
the date of the transaction. Foreign exchange gains and losses
from settlement of these transactions, and from translation of
monetary assets and liabilities at year-end exchange rates, are
recognised in the income statement except when deferred in
equity as qualifying hedges.
In preparing the consolidated financial statements, the
balances in individual group companies are translated from
their functional currency into euros. The income statement,
the cash flow statement and all other movements in assets and
liabilities are translated at average rates of exchange as a proxy
for the transaction rate, or at the transaction rate itself if more
appropriate. Assets and liabilities are translated at year-end
exchange rates.
The ordinary share capital of NV and PLC is translated in
accordance with the Equalisation Agreement. The difference
between the value for PLC and the value by applying the year-end
rate of exchange is taken to other reserves (see note 15B on
page 114).
The effect of exchange rate changes during the year on net assets
of foreign operations is recorded in equity. For this purpose net
assets include loans between group companies and any related
foreign exchange contracts where settlement is neither planned
nor likely to occur in the foreseeable future.
The Group applies hedge accounting to exchange differences
arising between the functional currency of a foreign operation
and the euro, regardless of whether the net investment is held
directly or through an intermediate parent. Differences arising
on retranslation of a financial liability designated as a foreign
currency net investment hedge are recorded in equity to the
extent that the hedge is effective. These differences are reported
within profit or loss to the extent that the hedge is ineffective.
Cumulative exchange differences arising since the date of
transition to IFRS of 1 January 2004 are reported as a separate
component of other reserves. In the event of disposal or part
disposal of an interest in a group company either through sale
or as a result of a repayment of capital, the cumulative exchange
difference is recognised in the income statement as part of the
profit or loss on disposal of group companies.